What is HAFA?

The Home Affordable Foreclosure Alternatives (HAFA) Program is a government-sponsored initiative announced in November 2009 overseen by the US Treasury Department and administered by Fannie Mae (Fannie) assisting all Home Affordable Modification Program (HAMP) eligible homeowners in avoiding foreclosure, specifically through short sales (SS) or deeds-in-lieu (DIL) of foreclosure. As of April 5th, 2010, with some banks participating sooner than the April 5th commencement date, HAFA directs lenders to assist eligible homeowners in quickly and effectively implementing short sales or deeds-in-lieu by providing financial incentives to both lenders and homeowners that proceed with foreclosure alternatives through the program’s guidelines. HAFA in its current state is only applicable to conventional-type, non-Governmental Serviced Enterprises (non-GSE) mortgages and therefore does not apply to loans owned or guaranteed by Fannie or Freddie Mac (Freddie). Fannie and Freddie may have plans to release their own versions of HAFA later this year.The HAFA program simplifies and streamlines the use of short sale and DIL options by incorporating the following unique features:

  • Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis.
  • Allows the borrower to receive pre-approved short sale terms prior to the property listing
  • Requires that borrowers be fully released from future liability for the debt
  • Provides financial incentives to borrowers, servicers, and investors. Borrowers can receive up to $3,000 relocation assistance assuming a complete he or she meets all of HAFA guidelines and provides all documents required to process short sale or Deed-in-Lieu of foreclosure.
  • Complements HAMP by providing viable alternatives for borrowers who are HAMP eligible

Timing & Eligibility


Servicers must consider a HAMP-eligible borrower for HAFA in accordance with their policies within 30 calendar days of the date the borrower:

  • Does not qualify for a HAMP Trial Period Plan.
  •  Does not successfully complete a HAMP Trial Period Plan. 
  •  Is delinquent on a HAMP modification by missing at least two consecutive payments, or 
  •  Requests a short sale or DIL.
  • When does HAFA expire?

    HAFA is set to expire December 31, 2010. Like other government initiatives, if the program is successful, it may be extended.

    Does the homeowner have to remain in the property to be considered for HAFA?

    In order to qualify for HAFA, the property is the borrower’s principal residence, except that the property can be vacant up to 90 days prior to the date of the Short Sale Agreement (SSA). If the borrower provides documentation that the borrower was required to relocate at least 100 miles from the property to accept new employment or was transferred by the current employer and there is no evidence indicating that the borrower has purchased a one- to four-unit property 90 days prior to the date of the SSA, Alternative Request for Short Sale Approval or or DIL Agreement may be granted by bank.

    How does a homeowner qualify for the $3,000 Borrower Relocation Assistance?

    This has been inaccurately described as “Cash for Keys.” If a homeowner completes a short sale or deed-in-lieu of foreclosure within the guidelines of HAFA, only then do they qualify for up to $3,000 in assistance to help them with relocation expenses. Only one payment per household is given, i.e., even if there are multiple family members short selling their joint residence, they must share the $3,000 between them.

    What are the tax considerations of a HAFA short sale or deed-in-lieu?

    The difference between the remaining amount of principal owed and the amount that the servicer receives from the sale must be reported to the Internal Revenue Service (IRS) on Form 1099C, as debt forgiveness. In some cases, debt forgiveness could be taxed as income. The $3,000 Borrower Relocation Assistance may also be reported as income. A short sale may have income tax consequences and/or may have a derogatory impact on the borrower’s credit score. Homeowners should contact the IRS or their tax preparer to determine if they may have any tax liability.

Post By Audeliz Angie Perez (160 Posts)

Angie Perez is a NJ Circle of Excellence award winning real estate agent for Re/Max Select in Westfield NJ. She sells anywhere from 12-25 houses per year on a consistent basis since 2005. Ms. Perez is primarily a buyer's agent on 60% of her real estate sales where she represents rental income investors, first time home buyers & trade up home buyers of 1-4 family homes within specific towns encompassing 4 NJ counties: Union, Essex, Middlesex and Somerset County. Many of Ms. Perez's clients appreciate her ability to negotiate favorable real estate deals for them. Many of her clients commented that her research abilities, her honesty, her knowledge of local market trends and her proficiency to manage multiple real estate transactions from start to close are some of the reasons why she was hired as their agent of choice. Please call, text or email Angie Perez to ask if she lists or sell in your town. If she can not help you, Ms. Perez would be more than happy to help or refer you to someone who can.

Website: → NJ Real Estate For Sale




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One Response to HAFA in Plain English

  1. A Short Refinance is the solution for Homeowners that have done everything right but find their home upside down or underwater in value due to an outside influence of the market you now have a very positive solution.

    For Homeowners who have experienced some king of economic hardship then a Loan Modification is still working today for those who get the right help.

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